Parties Bargain Research Articles

Tax contracts, party bargaining, and government formation

We explore how tax contracts affect government formation and welfare of voters in a democracy with proportional elections, four parties and sincere voting. A tax contract specifies a range of tax rates a party is committed to if in government. We develop a new model of party competition and formation of the government which chooses tax rates, public-good provision, and perks. We show that the introduction of tax contracts has two effects: a perks effect and a policy-shift effect. The former plays a central role in societies with a low degree of political polarization, where it tends to reduce politicians’ perks. In highly polarized societies, tax contracts can yield more moderate political outcomes. However, there exist circumstances in which tax contracts induce more extreme policies.

Calculating claims: Jewish and Muslim women navigating religion, economics and law in Canada

This article presents an empirical study of Jewish and Muslim women who go through divorce in Canada, drawing on a ‘left law and economics’ methodology. Religious law and family law have long been considered outside the market and, as a result, are more rarely accounted for in the law and economics literature. According to dominant narratives, religious family law is experienced by women either as an exceptional form of oppression or as a form of spiritual religious identity. In this article, I apply a ‘left law and economics’ approach to deconstruct these notions. On the basis of my socio-legal fieldwork with Jewish and Muslim women in three Canadian cities, I identify the background formal and informal legal rules, social norms and distributional practices that help produce asymmetric bargaining locations for women. I employ the economic language of costs/ benefits to illustrate the ways in which religious parties bargain strategically upon divorce, although these market claims are surprisingly underrecognised by the legal system. Such empirical knowledge helps disenchant the idea that religious law is systematically used as punishing forces that make women worse off economically or morally inferior. It also allows for a distributive analysis which reveals how husbands and wives negotiate economic resources, desires and day-to-day decisions in all kinds of fair and unfair ways, flying in the face of conventional narratives surrounding women and religion.

Empirical Study on Effects of Single Party Bargaining System on Cooperative and Participative Labour Relations

Empirical Study on Effects of Single Party Bargaining System on Cooperative and Participative Labour Relations

Union–firm bargaining: Order of play and efficiency

This paper shows that a modified alternating offers Rubinstein model can provide a Pareto superior outcome in the context of the right-to-manage union–firm bargaining. Two examples of bargaining protocols that yield a superior outcome are provided. In the first example, the parties engage in a game in which the order of play is determined as part of the bargaining. We show that the game has a unique subgame perfect equilibrium in which the firm always moves first in the wage bargaining game. The equilibrium wage is, therefore, unique. In the second example, we examine a two-part-tariff alternating offers bargaining protocol, where the parties bargain over the wage and transfer payments. We show that this bargaining protocol has a Pareto efficient, unique subgame perfect equilibrium. Thus, although the parties do not bargain over the level of employment, the outcome under this protocol is, nevertheless, socially optimal.

Spot Natural Gas Prices: A Theoretical Party to Party Bargaining Framework

Whilst some regional energy markets appear to be integrating, modelling the pricing of natural gas exports in an imperfect global spot market remains a difficult task. For the sake of analysis, this paper proposes the expansion of a theoretical global party to party spot gas price bargaining model to capture lagged daily prices of the major competing fuels and values of a global economic indicator in the world stock market price index. Vector autoregressive based tests provide no evidence of cointegration, however tests of exogeneity show that gas prices and gas price changes are primarily influenced by oil prices and oil price changes. Within this framework, it is found that the oil price and oil price changes are influenced significantly by global stock price index values and index value changes and the coal price index values and index value changes. The model put forward is purely for preliminary analysis but it shows potential. All markets need to become larger, more globally integrated, more informationally efficient and mechanisms to arbitrage the various energy markets would need to be established before a final global gas spot price index is possible.

Bargaining with Rent Seekers

AbstractConsider a rent‐seeking game, which has government bargain with firms over dividing the rents. In period 1, each firm can invest to increase the probability that the rent will appear. In period 2, the parties bargain. In equilibrium, though firms will invest more than the socially optimal level, rent‐seeking expenditures may be low. Firms that collude to restrict investment maximize joint profits by investing at a positive, non‐infinitesimal level, and restrict investment even if the cost of rent‐seeking effort is zero.

Costly enforcement of property rights and the Coase theorem

We examine a setting in which property rights are initially ambiguously defined. Whether the parties go to court to remove the ambiguity or bargain and settle privately, they incur enforcement costs. When the parties bargain, a version of the Coase theorem holds. Despite the additional costs of going to court, other ex post inefficiencies, and the absence of incomplete information, however, going to court may be an equilibrium or ex ante Pareto-superior over settlement; this is especially true in dynamic settings whereby a court decision saves on future enforcement costs. When the parties do not negotiate and go to court the Coase theorem ceases to hold, and a simple rule for the initial assignment of rights maximizes net surplus. (JEL C70, K40)

Modelling Global Gas Price Changes: An Expanded Party to Party Bargaining Framework

Whilst some regional energy markets appear to be integrating, the pricing of natural gas exports in an imperfect global market remains a difficult task. This paper expands a global party to party gas price bargaining model to capture optimally lagged daily price changes of the major competing fuels and daily changes of a global economic indicator in the world stock market price index. Vector autoregressive based tests provide evidence of cointegration. Exogeneity tests show that changes in the daily gas price are primarily driven by changes in the daily oil price. Within this framework it is found that changes in the latter variable are driven significantly by daily changes in global stock price index and coal price index values. This may assist gas producers in both forecasting prices and in their pricing negotiations.

Staying in the Game or Changing It: An Analysis of Moves and Turns in Negotiation

As parties bargain over the terms of an agreement, they are concurrently negotiating their relationship. In this parallel negotiation, parties seek to position themselves to advantage by using a variety of strategic moves. In so doing the other party can be put into a defensive position making it difficult to advocate effectively. Turns, such as interrupting, correcting, questioning, naming, and diverting, challenge these moves. Turns can be used restoratively to move out of a defensive position or participatively, to engage the other in collaboration. Anticipating strategic moves and having turns in mind is part of preparing to negotiate.

The flypaper effect and political strength

Simple models of local government behavior predict equal effects of private income and unconditional federal grants on local government expenditures. Numerous empirical analyses, however, find that the effect of grants is larger than the income effect. We argue that this flypaper effect may be a result of weak political leaderships in multi–issue and multi–party decision–making environments. In multi–issue institutions, a strong political leadership may reduce inefficiency due to interest group influence and inter–party bargaining in the local council. Utilizing data for Norwegian local governments in the 1930s, we find that political strength reduces the size of the flypaper effect. When the local council consists of only one political party, we cannot reject absence of a flypaper effect, while the flypaper effect is large in fragmented local councils.

Third party bargaining and contract terms: a link over time?

To evaluate whether prior pharmacy bargaining process strategies and pharmacy dependence on third parties affect the bargaining power of pharmacies in price negotiations with third parties. One-time survey. Random sample of 900 independent and small chain pharmacies in nine states: Colorado, Connecticut, Georgia, Kentucky, Minnesota, Oklahoma, Oregon, Pennsylvania, and Wisconsin. Two hundred sixteen of the returned surveys contained sufficient responses for this analysis. Survey data on pharmacy bargaining power and prior pharmacy bargaining strategies, pharmacy dependence, and market characteristics were analyzed using multiple regression in a previously developed and modified provider/third party bargaining model. Pharmacy bargaining power. Pharmacy bargaining power varied across our sample. Pharmacy bargaining power was positively related to whether a pharmacy previously bargained with the third parties, negatively related to prior requests for contract changes, and negatively related to the pharmacy's dependence on third parties in total. Pharmacy bargaining power is related to the bargaining strategies employed by pharmacies during the previous year and the dependence of pharmacies on third party payers in total. With the prevalence of "take-it-or-leave-it" contracts from third parties, prior pharmacy bargaining behavior may affect the initial terms of the contracts that pharmacies are offered.

On competing rewards standards—an experimental study of ultimatum bargaining

In the tradition of earlier experimental studies, this paper introduces competing reward standards by letting parties bargain over the distribution of chips. The monetary equivalents of a chip for the bargaining parties can be equal (no competing rewards) or different (competing rewards). The ultimatum game is used as a tool to learn about reward standards in an asymmetric procedure. A major effect of different monetary chip equivalents is observed only when the proposer has a higher chip value. Results are compared to those reported in [Games Econ. Behav. 13 (1966) 100], who used a different experimental design.

Equilibrium Contracts In a Bilateral Monopoly with Unequal Bargaining Powers

Real-world bilateral monopolies often indicate that one party exercises slightly Superior bargaining power than the other party. We analyze long-term, cooperative Contracts in bilateral monopolies with unequal bargaining powers. We assume that the Two parties bargain for a determinate price and quantity of the intermediate product by Optimizing a joint objective which takes into account the profits and bargaining power of Each party. We use a Bowley price leadership model to develop the multi-period Contracts and derive conditions that induce a Nash equilibrium at the jointly determined Points of operation. [C71,C78]

Costly Enforcement of Property Rights and the Coase Theorem

We examine a setting in which property rights are initially ambiguously defined. Whether the parties go to court to remove the ambiguity or bargain and settle privately, they incur enforcement costs. When the parties bargain, a version of the Coase theorem holds. Despite the additional costs of going to court, other ex post inefficiencies, and the absence of incomplete information, however, going to court may be an equilibrium or ex ante Pareto-superior over settlement; this is especially true in dynamic settings whereby a court decision saves on future enforcement costs. When the parties do not negotiate and go to court the Coase theorem ceases to hold, and a simple rule for the initial assignment of rights maximizes net surplus.

Compensation and Bargaining with Entrepreneurship as the Outside Option

We analyze the impact of entrepreneurship as an outside option on compensation contracts between a principal and an agent with bargaining power. In the first stage the parties bargain over the base wage and the profit share. In the second stage the principal determines the capital investment and the agent decides on effort. It is shown that while negotiated base wage increases in the degree of the competitiveness in the market for outside equity funding, the profit share is invariant both to the imperfections prevailing in the equity market and to the relative bargaining power of the negotiating parties.

L'lmpact de la négociation et des prises de contrôle sur l'ampleur de l'effet de cliquet

This paper considers a long-term relationship between a firm and a privately informed trading partner, say a buyer, when both parties bargain over a price in each period and when a takeover may take place. When takeovers are ruled out, having high bargaining power increases the firm's likelihood to exploit information previously revealed by the buyer in sub- sequent contract offers. This decreases the price which the firm can offer to induce the buyer to reveal his type. The possibility of a takeover by a raider with a bargaining power higher than the incumbent manager's increases the cost of information revelation to the buyer. This in turn leads the incumbent manager either to further decrease the price she charges to induce informa- tion revelation or to charge a semi-separating price, in which case the takeo- ver is less likely to take place. In contrast, in the durable good monopolist case, information revelation decreases expected future profits and hence the incentive for takeover so that the possibility of takeover favors information revelation. (JEL D42, D82, G32, L14)

Distinguished Lecture on Economics in Government: Big Bills Left on the Sidewalk: Why Some Nations are Rich, and Others Poor

Some research presumes that, when rational parties bargain, nothing is left on the table, so that social outcomes are efficient and leave countries on the frontiers of their aggregate production functions. A study of differences in per capita incomes across countries shows that this cannot be the case. Countries’ endowments of natural and human resources do not explain any significant part of the variation in incomes and the mobility of capital assures that it is impartially available to all countries. National differences in the quality of policies and institutions across countries mainly account for differences in per capita incomes.

The bargaining range in legislative district apportionment

One of the few “laws” of political science is the fairly regular relationship in any given plurality electoral system known as thecube law, transforming vote shares into seat shares. In this paper, we develop an altogether different and more robust paradigm relating seats to votes which generates similar results as the cube law. In our model, political parties bargain with each other for an expected number of seats using the ability to gerrymander in determining their bargaining strength. We find that an arbitrated solution to the seat-vote allocation problem generates solutions remarkably similar to the conventional cube-law-based solutions. Thus our model can in some way replace the cube law paradigm. With our model, we are able to evaluate the impact ofBaker v. Carr (1962) on gerrymandering. We also find that proportional representation results can be achieved within our model by allowing non-zero population deviations between districts.

Government Formation and Endogenous Parties

I provide a formal theory of government for a political system characterized by a proportional representation electoral system, a parliamentary government that exercises collective responsibility, and a government formation process. Political parties are assumed to be policy-oriented and to serve the interests of those who vote for them. Parties choose policy platforms that determine their representation in parliament; and given that representation, the parties bargain over the government to be formed and the policies that government will implement. The model yields equilibria with the property that parties choose dispersed policy positions. Thus, electoral incentives in proportional representation parliamentary systems need not lead to policy convergence. The theory provides predictions of party locations such as those developed in the manifesto project.

Contract Modification: An Economic Analysis of the Hold-up Game

The very foundation of our contract law is based upon the premise of the bilateral voluntary exchange. In a market economy, such exchanges involve a process in which the parties bargain voluntarily, each striving to maximize his own economic advantage on terms that are acceptable to the other party.' The presumption is that this process yields a in which at least one party is better off and neither party is worse off than would have been the case without the exchange.2 The same logic suggests that if the parties to a contract should subsequently wish to modify it due to some change in economic circumstances, unforeseen circumstances, or simply a change of mind,3 then modifications freely entered into by both parties should yield further Pareto improvement and should be enforceable.4 However, a problem arises when one party to a contract agrees to a proposed modification either because of expected dire consequences should that party not agree to the modification or because the available remedies for breach by the other party are inadequate to deter breach by the other party.5 This point is emphasized by White and Summers, who note that not all